With the unrest in Iraq fuelling a renewed focus on gold, and the next interest rate review by the US Federal Reserve’s open market committee giving currency traders something to think about, it’ll be macro issues grabbing the attention of many derivative traders this week.

Virtually every commentator on Monday was forecasting a continued rally for the precious metal beyond the $US1275 level from where it has staged forays towards $US1300.

ThinkForex senior markets analyst Matt Simpson called the latest gold action the most bullish period in three months, both technically and fundamentally.

On Monday, gold resumed trading in Asia at $US1278 and then extended this to $US1282. IG Markets strategist Stan Shamu commented on gold’s swift comeback after its dip to $US1240 just a couple of weeks ago.

This has seen it trade right on a down-trend resistance line which has been in place since mid-April with traders needing a close above $US1282 to confirm the break.

A move such as this, says Shamu, would see gold close above its 200-day moving average.

Technical indicators that support a rally, says Simpson, included a candlestick reversal pattern and a view that the action included short-covering by bears closing their short positions to avoid being caught on the wrong side of the market.

A rally that takes gold above a series of technical levels between $US1283 and $US1296, says Simpson, should provide support for a move forward. A gain beyond this should invalidate a bearish continuation triangle which formed between April and May with a downside of $US1229.

Shamu says there is plenty of talk about iron ore being at a cyclical low, with most analysts expecting a rebound in the third quarter of 2014.

The Iraq story also helped local energy shares
Santos
,
Oil Search
and
Woodside
edge higher. While sellers seemed to control trading early, buyers entered as the day progressed, lifting the S&P/ASX200 to the 5400 level which is likely to be where it will be tested this week.

CMC Markets chief strategist Michael McCarthy was impressed by Newcrest’s more than 3 per cent move on Monday on the back of speculation that further Iraqi instability would push gold beyond Monday’s modest half per cent rise.

Bear-call rewards

As far as the overall market is concerned, if it stays under 5475 this week, says Ord Minnett options adviser Wai-Yee Chen, it’ll reward traders who followed her mid-May bear call index spread strategy as a way of taking advantage of a range-bound ASX 200. This strategy, which generated 20 points or $200 income per contract at the XJO strike of 5475, looks to be expiring worthless. It will then lock in the full $200 profit per contract this Thursday, if the XJO stays under 5475.

For those tempted to repeat this strategy in July, Chen suggests selling the index with a lower 5450 strike with protection bought at 5500. The maximum loss of 50 points is countered with immediate income of 18 points.

As with the mid-May strategy, if the index stays below 5450 by July 17, the reward is the income the trade will generate.